T-Mobile USA Announces Merger With MetroPCS Is Complete
Enid Burns for redOrbit.com — Your Universe Online
The fourth largest mobile phone carrier in the United States became a little bigger on Wednesday. T-Mobile USA announced that it had completed its acquisition of MetroPCS, and the new company will now simply be called T-Mobile US. The new company rang in the bell on the New York Stock Exchange (NYSE) under the ticker “TMUS.”
The deal was concluded after T-Mobile´s parent company Deutsche Telekom paid MetroPCS stockholders $1.5 billion — along with MetroPCS taking T-Mobile´s capital stock from DT in exchange for approximately 74 percent of MetroPCS common stock. This gives T-Mobile an additional nine million subscribers and brings the total for the combined company to 43 million.
“The combination of T-Mobile and MetroPCS creates an even stronger disruptive force in the U.S. wireless market,” John Legere, president and CEO of T-Mobile US, Inc., said in a statement. “Together, as America’s Un-carrier, we’ll continue our legacy of marketplace innovation by tearing up the old playbook and rewriting the rules of wireless to benefit consumers.”
This deal follows an unsuccessful bid by AT&T, which is currently the number two mobile carrier in the United States after number one Verizon Wireless, to merge with the number four carrier. Rumors abounded last year that T-Mobile and number three carrier Sprint would possibly merge — as both companies lag behind the two leaders.
“When the AT&T merger with T-Mobile failed to go through T-Mobile was left behind in the dust and they´ve been struggling ever since,” telecommunications analyst Jeff Kagan of Jeff Kagan and Associates told redOrbit. “We have a limited amount of spectrum and we still have too many carries.”
In addition to the added nine million subscribers, this merger also gives T-Mobile more wireless spectrum, something every US carrier desperately seeks as more consumers use data heavy smartphones and other wireless devices including tablets. According to T-Mobile, this will give the carrier spectrum in approximately 90 percent of the top 25 metro areas in 2014 and beyond.
T-Mobile has been slow to adapt from 2G to 3G and, according to Kagan, misread the tea leaves when it came to the smartphone revolution. By the time the company caught up with the changing of the market, it was too late.
For now the two companies will operate individually under T-Mobile US. This will see the expansion of the MetroPCS brand nationwide, which continues to operate out of Dallas, while the T-Mobile brand will reportedly operate out of Seattle. The merger will however give T-Mobile more spectrum in about 90 percent of the top 25 markets in the United States.
This merger could now allow the company to get into the prepaid business through the MetroPCS brand, something that rival Sprint has been successful with through its Boost Mobile and Virgin Mobile brands. Those subsets have continued to operate somewhat independently, but even with these acquisitions Sprint hasn´t seen much growth.
The question of course is where this might leave Sprint now that T-Mobile US could add competition in the pre-paid market?
“Sprint is the loser and until they figure out a merger of their own they are in flux,” said telecommunications analyst Roger Entner of Recon Analytics.
T-Mobile has also been successful with its contract free offerings, but Entner told redOrbit that how this shapes up in the future is the other piece of the puzzle.
“T-Mobile will still have a pretty challenging time going forward,” he added. “The new contract offers are confusing to me, as I´m not sure how these are different from a regular contract plan. It shows that T-Mobile can´t escape the laws of gravity that in exist in handset financing [sic].”